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hi this is Bob tooms again and I just wanted to show you what I call the California LLC tax trick now although this is specific to California I'm I want to show it to everybody because every state really has its own little tricks and if you can gain insight into what one state does typically you can get an insight into what your state is likely to do besides if you live in California I really want you to see this because it's very important what we're looking at here is the 2007 limited liability company return of income form 568 let's just do a little let's just say that you've made a hundred thousand dollars for this tax year ok that's terrific now what it comes down to for this particular trick is lines two and three the limited liability company fee see instructions and the limited liability company tax see instructions okay so let's go to the instructions here's what this is all about I think everybody knows that if you run an LLC in California you owe $800 to the state regardless of whether you've made any money or not now if you're just looking at the form if it's your first time filling this out you're gonna see limited liability company feet well that sounds like that $800 thing that you've heard about because the $800 is a flat amount did you have to pay regardless of whether there's any income or not and then down here limited liability company tax well that sounds like an amount that would be based on your income because every other tax you've ever seen in your life is based on the amount that you've made or that your company's made or whoever has made it to graduated tax if you made this much you owe this much if you made more than that you owe more than that so you've made a hundred thousand dollars for the year and there happens to be a cut-off of about two hundred and fifty thousand dollars this year so you're under that cutoff so you don't go any of what you would think of as a tax but back to the instructions where we see annual limited liability company tax LLC's are subject to an eight hundred dollar annual tax if they are doing business in California oh wait a minute that thing you thought was a fee is here called a tax and down here a limited liability company fee in addition to the annual tax every LLC must pay a fee based on total California income that's a complete reversal of what any reasonable human being would expect and believe me people make this mistake I made this mistake friends of mine made this mistake it happens all the time and here are the consequences if you do this wrong if you fill out lines two and three wrong many months later you will get something that looks like this in which they tell you fee nothing tax eight hundred dollars what they're telling you is that because you put you thought this was a fee so you put eight hundred dollars here and you put zero here that weird thing is PDF and trying to fill in a an old value of pay no attention to it this is wrong don't do this otherwise you will get this and what they've done is they've literally sent us back our eight hundred dollar check and they're asking for an eight hundred dollar check plus all these penalties and interest for doing it wrong by the way this was a few years ago so those amounts have probably changed so the thing that you need to do go back to here is this is zero and this is eight hundred dollars that is correct do that and you'll be fine now that was part one of the trick you thought that was enough oh no there's more part two has to do with the fact that you're $800 LLC tax is due literally the second you incorporate your company even if you incorporate on December 10th of let's say 2007 you owe $800 for the entire year that amount is not prorated and it's due right away so first bit of advice we'll just add $800 to your startup budget and just get it paid whenever you start up and just get it over with because here's what happens you're seeing that I'm doing the 2007 form 568 at the same time that I file this on April 15th I'm going to file the 2008 LLC tax voucher now let me just show you that again because there is a logic to this but you kind of have to hang on tight to get there we're doing it it happens to be March of 2008 right now as I'm recording this and so I'm going to be preparing the 2007 return of income because I can only report last year's numbers I don't have this year's numbers that's why these reports always trail by one year but if you think of the fact that the LLC tax is always due no matter what then it's kind of always do in the present so you're going to be doing the 2008 tax voucher the 2007 return of income reporting on last year's numbers but the 2008 tax voucher for this year so again just just remember that this is always do in the present it's kind of always do now so that as soon as you start your company just go ahead and budget the extra money pay the $800 get it done and then you'll be on track so that's really those are parts 1 & 2 of the LLC tax trick and I just really wanted to show this to you I don't get anything out of showing it to you but it's it's terribly important so there it is and again this is only relevant to California LLC's specifically but again every state has its own little tricks so please keep in a close eye out for this sort of thing um so that's it please go forth and be prosperous and thanks very much
Thanks for your comment Christal Jech, have a nice day.
- Dante Gergel, Staff Member
one thing that's very important though veronica with an llc in california is you do have a state tax return that's a separate form for the llc which is called form 568. okay so very important you don't have to file a separate form on the federal side okay but you have to file form 568 for that llc so that is in terms of veronica like your action plan you you uh there's some late filing penalties and some issues that can come up if you don't file the form 568 such as the the llc being suspended and different thing unpleasant things like that
Thanks AOTG your participation is very much appreciated
- Dante Gergel
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I've studied agronomy at Wesleyan University in Middletown and I am an expert in molecular mechanics. I usually feel frustrated. My previous job was nuclear power reactor operator I held this position for 25 years, I love talking about handball and ukelele playing. Huge fan of Hey Monday I practice acrobatic gymnastics and collect sports cards.
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